Greedy Goblin

Friday, October 16, 2009

GDP/smart

Here I am again to ruin your beautiful Friday as a self-proclaimed prophet of inevitable doom!

Based on comments this post is looking forward a serious rewrite, keeping the point but changing the argumentation.

The idea that GDP can be decreased by technological advancement is counter-intuitive, as technology make us more productive, and the letter "P" in GDP is "product". It's obvious that we can't compare the GDP of countries since they are very different in population. Since you are a guy and not a country president, you want to live in a country where you can be rich. A place where the GDP/person (and no raw GDP) is high offers better chances for that, if all else is the same.

However let's make a change in methodology: let's include the dogs into the population. If the country has 4:1 human:dog ratio, then the GDP/(person+dog) will drop by 20%, despite nothing changed in the economy.

Why does no one suggest to include dogs into the "person" field of the GDP calculations? Because both the production and consumption of dogs are directly linked to their owners and not to other man. If some guy chooses to have a pet dog, his wealth will drop, as he'll spend on dog food and vet costs. If he buys a guard dog, his wealth can increase due to less thefts. But your wealth won't be affected.

Your chance of being rich is not affected by the number of dogs in the country, so it would be stupid to calculate GDP/(person+dog).

However let's introduce morons, people who cannot do skilled jobs. With the technological advancement they can no longer employed in productive industry. The technological advancement increase the productivity of the company, therefore the income of the owner and it's workers. So the GDP/smart people will increase. If we approximate "smart" as "capable of holding a job or business", then we'll get the following chart (USA, employment source, GDP source, 2009 is estimated from Q1&2):

Where is the recession? The GDP/smart shows no recession in 2008-9, also no problems in 2001-2 and no booms either. It's a straight, smooth line without either positive or negative peaks. It's just like the one imagined by the most romantic daydreamers: mankind progressing forward without stops and fallbacks.

We could claim that the GDP/(smart+M&S) is just as wrong indicator as the GDP/(person+dog). All we have to do is replace the indicator with GDP/smart and we can watch the beautiful green line moving forward forever and ever.

However life is not so simple. Remember that we rejected GDP/(person+dog) on the basis that dogs of other people have no effect on our life. But the number of M&S in your country does affect your life, therefore they must be included to the GDP calculation. The main difference between dogs and M&S is not their contribution to the society. Both does very little to none.

The difference lies in our political systems. Dogs only consume the wealth of their owners. If I don't want to have dogs, I don't buy dogs. Dogs have some rights, like I can't throw out or kill my existing dog, but having a dog was my choice on the first place and I can stop the growing of dog population on my yard by sterilizing my dog. On the other hand no foreign dogs can just walk into my yard and demand food and home.

M&S on the other hand, despite their close-to-dog use to the society have the same rights as you. They have equal vote on how to spend tax money (though they have no contribution to it) and also you can't get rid of them. Even if they commit serious crimes, they can't be just disposed, but processed trough the extremely expensive legal system and then kept in expensive prisons.

So no. You can't watch the green line. As long as the M&S is equal to the useful member of the society, it's methodologically right to use the red line. The green will keep on growing in the following years, like it always did. The red will fall down.

PS: some could say that by defining "smart" as "employed or business owner" I put kids, between jobs and elderly to the M&S. It's theoretically true as they have no more current use to the society than a dog or a welfare leech. However they did or will do useful things. If we assume that every smart people spend equal time as active worker and as child-pensioned-jobseeker, then it doesn't affect the shape of the GDP/smart curve, just translates it with the "active time/all time factor". The main difference of the M&S and some random currently not employed is that they did not and will never contribute to the progression of the mankind.

37 comments:

Ablimoth
said...

Your gdp/smart is actually gdp/employed (unless I read you wrong). But your final paragraph states that you do not intend to discount kids, elderly, [students] or between jobs. Your measurement does not appear to stack up with your intent.

You would have to determine a better method for calculating who is M&S and who falls into the other categories (and obviously self report is not sufficient).

its not intended but what has children, elderly people, or students done for the economy while unemployed and receiving welfare checks, medicade, or hell just out right stealing things. they lower the gdp/person.

the smart would be not having any of them. we all progress happily onward in the smart utopian society, because we don't utilize anti-social factors of:1) euthanasia 2) forced labor3) all pervasive police(IE: barcoding to track people)

we get the red line.

rather than using the exact data, look at what it represents.

our economy will continue to dip as more and more people are outdated or become M&S, which forces the GDP/person lower because we gotta share our wealth to keep them alive. This is how come communism is just as flawed as the current economic system[speaking only for USA]..->

We place our value in a currency which has no backup.. ever watch south park? Space Bucks = world Currency. "You guys are the first to actually take the space bucks"

Ummm, you want to include dogs in GDP? For real? Are you being cynical, sarcastic, insane, or just mocking something? What about cats, fish and guinea pigs? No love for them? :(

GDP is one of those overvalued statistics. It doesn't include any indicators of happiness (just b/c youre rich doesnt make you happy) or gifts. If you want to increase GDP all you have to do is slit your wrists and go to the emergency room (medical services count, $750/hr).

I'm still trying to figure out the point of your rant. Is this just another tirade about "dumb people who leech from society and wont amount to anything? & M&S are stupid: They should be all shot!"

I'll sum up about 50 Gevlon rants "M&S are welfare leeches of society"

P.S. You never posted a public retraction about your pwned definition. Confess your sins! (aka Be Honest and say you messed up) We all saw the Stealth Edit.

I concede on the students and children, as for part 2 ; yes as the more people who are unqualified to work in any capacity are thereby unemployed which lowers the GDP/person.

*it will continue to rise but not as well as it should if the ancients are left around*.

for instance; automation has introduced the technology advancement factor into the GDP/smart. Ford motor company incorporates robots to weld and wire the cars.

Who gets fired because they are now useless? the humans of course.

the GDP of the company goes up but you now have those ex-workers on welfare; consuming/stealing and otherwise now leeching more money out of those who are still working.

It's a known fact that when unemployment rises so does crime.which then lowers the companies GDP/person(still working in the company even more so) because they now have to pay more to keep the welfare going.

It retards the growth, so it sticks to the red line rather than the green line.

*less people working = less buying. this in turn creates the GDP to lower because the prices lower to try to accommodate, which again spirals into laying off more people to compensate the lower prices(or wage cuts).

The only reason GDP was continuing to grow is because of the false value any currency holds. I have 7.8k on paypal... but what is guaranteeing me I can wake up in a few hours and pull it out and go spend it, nothing but what is backing the virtual currency in order to transfer it to my "real paper" currency?

I don't suggest a one world currency either. but the US Dollar really needs to be taken into check against gold /silver reserves ( which happens to be only valuable because of the USD and other currencies..

This is why communism in theory is favorable but in practice it is utter shit because of always changing variables and the added deficit of the unemployed contributing nothing.

The proper solution is to skim down as much of the deficit humans as possible but still retain good headway. but due to government laws and "humanities" we can never achieve the correct equilibrium to sustain the green line.

Unless say someone took over the world, one form of currency, then enacted strict policies and executed those who don't pull their weight.

good way to fix the USD is also to let it continue inflating until it is worthless thus resetting the debt of the US. Pop out with a new currency or adopt another currency.Many countries would be unhappy but hey, the GDP vastly rises(as it dipped down to nothing) to equate with the new currency and begins the entire cycle over again.

Your comparison has a major flaw. People aren't fixed in the position they occupy in society. A "smart" person can become lazy, so their value to society would decrease. And a "M&S" can decide to apply themselves and increase their value to society. Dogs are a poor comparison because a DOG can't contribute to the GDP of a country, no matter how hard it tries.

You are incorect. Automisation has no effect on GDP, it simply reduces payment to laborers. That payment is then kept by the capital owners (and machine maintenance) or is returned to other areas of the economy due to lower prices. Automation allows the reduction in costs and the redistribution of labor income.

The automotive industry in the US failed because it was producing the wrong vehicles with the wrong reward structure for its employees.

Where have the layed off workers gone? since we are going to be using theory mostly;

What if every company for everything that can be automated, was so?

Humans are displaced which for GDP/person drastically drops do to about 95% of the worlds populace ... doing nothing. they then become too poor (no income) to spend, the items made begin to get backed up, which results in lowering the prices but since no is working it will continue to drop (Corporate GDP as well).

We all end up with no work since the machines do everything, Corporations as we know it would crumble into dust and everything would required to be shared freely in order to not create debt.(which could not be repaid in any form beyond theft ... and you cant make free and more free.

Every human then born adds load to the machines producing. there comes a point when they can no longer sustain the human population and then human population peaks and NO headway ever is made.

Which is why balancing would be required to keep it growing rather than allowing technology to continue displacing humans. Rid the currently useless leeches(old people). Maintain balance that everyone possible is performing within a standard of duty or kinetic possibility (students/children).

Also, look at Zimbabwe. You just suggested that the US do the same thing with their economy. Your GDP analysis is flawed also and the suggestion that we eliminate non profitable people is concerning. Particularly when a strict definition is not suggested.

GDP per person is an irrelevant measure, even were it not, claiming that it would change simply from automation is claiming that either GDP or population changes due to automation (while a reasonable argument could be made re: free time & childbirth). This is obviously not true, only the distribution of GDP would change.

redistributing GDP/person would still make the graph drop, your increasing the population while the production is still where it was.

which free time does lower the GDP even more. -Welfare due to not working, and the added effectchildren and students are already disqualified directly (due to kinetic possibility)

"Here is your gravity pump to move the stars... we can't spend all of earth's money everyday you know"

GDP is still based on the assumption of what our time costs(wage/productivity)

If you produce nothing your then a deficit. and retarding the growth of GDP/person in the world.

we want green and no matter what we continue to get red.

the correct GDP/person would result in killing off more and more of the human race until its only one man. and if he sleeps- he dies, so green is a goal we want but can never achieve. But our cause to continue being near it is removing more of the load, and balancing it.

Balancing while maintaining growth is the ideal. the only plausible solution without killing off the human species .. is removing the old people and removing welfare people. - potential is excluded.

the welfare people currently already show that they have tried and failed (otherwise they would be working were they not?)

rating GDP per year not per second, this creates the chance for the now layed off worker to find a new field. otherwise your a deficit and should be removed.

I have already said that GDP per person is a worthless measure. Further, you claim that redistribution of wealth increases population (read what you wrote again) and the rest of your post is nonsensical in any view except the extreme short term (and even then, poor). I will not continue this conversation with you.

err... I don't get it. yes, everyone hates M&S. yes, they do not "produce" anything. yet, without getting into theories that I do not know, I will only say that no economy or political system will discard them. the above mentioned systems do not need producers. they have those already and do not want to replace them because they do really good. they need consumers/ buyers. no one cares how you make your money, because if you do, you are not producing anything really. everyone cares about you keeping on buying stuff. and the real life M&S are not poor. they are just idiots.I still don't know whether this post was in relation to applied economics or with any cultural/social system...

Dear GevlonHave you ever studied social economics? If not (and I presume you havent as your analysis are overly simplified and based on bad data, alternatively you didn't care the first time), would you consider it? It seems to be a passion of yours, since the WoW part of this blog seems limited to occationally point and laugh at the M&S now, and perhaps something that would enrich your life to delve into further.

This should include moron executives too. One of the things I hate about my job is you can't tell these people the truth. They don't want to hear it.

I swear that they higher the chain you go the stupider you have to be.

Its kind of like only doing cost cutting of the lower employees, while paying the CEO more, and doing nothing else. Its not a good business model. Sometimes you have to invest money to make more rather than running lean an mean.

There will be a point where you cant run any leaner with out hurting your business.

Yes, while GDP/employed person may be rising, the average salary in real terms of the labor force is falling (at least in the US). This is not sustainable, especially in a nation where many of the working class and "M&S" own guns...

As IT specialist I can tell you that the goal of all projects we do is to make stuff easier, and usuable by morons. And it's not always the low educated people that are those morons. Believe me, the dilbert strips are not that exaggerated (which I used to believe when still in school), marketing people can be unbelievable morons. They are able awaken primal instincts that make me want to break their teeth on regular basis. some BMW driving managers are completely clueless about what they're managing, but just very good pushers.

To keep it short, the world is filled with morons, and LOTS of them make good money. The ones that don't get needed more too, because the harder the non M&S works, the more need he/she has for simpletons to do the trivial things he would otherwise do himself. Stuff like cleaning the house, taking care of his kids while at work, delivering the internet ordered groceries or other stuff, maintaining the garden, making the coffee even, the fast food required by lack of time for real food (technology has simplified that FOR morons too, they now can literally push a picture of a hamburger or a cola on their cash register, instead of numbers). Being social WORKS GREAT in large companies btw, and in sales, etc. Even entertainment could be a great possibility for morons (paris hilton anyone). Besides GDP will always grow because of inflation anyway. Kids grow up with computers, and computers get simpler (I miss the days when helpfiles contained techincal info, monitors were delivered with schematics, etc)

Man, I got so many ideas and counterarguments my head starts to spin and I'm losing grip on one while the next one pops in my head. I like your thinking, but you want to believe something so much that you seem to be getting tunnelvision.

@Nicolas, automation can't decrease GDP/person without actually decreasing GDP (since it clearly doesn't increase the population). Example: car factory has 100 employees and makes $100billion/yr, GDP/person is $1billion/person. Now it fires 90 people and replaces them with machines, and still makes the same number of cars, so still $100billion/year. Now the GDP/person is $100billion / (10empyolees+90bums) = $1billion/person, exactly the same as before, just now only 10 people are contributing, while the rest do nothing.

@Gevlon first of all you're conflating intelligence with employment, I think that you can easily recognize why that's not the case. Also ideally in an economy the set of unemployed people should be rotating (most econocomic theory suggests a ~5% unemployment rate is both necessary and good to have) The green line staying up is unsuprising, people who are employed are still as productive (if not more so).The divergence is of course caused by the increase in the unemployment rate. If/when unemployment rates settle back to historic averages, you'll see the lines converge once again.

By defining smart as "employed", of course you smooth out GDP, since generally companies lay off workers in recessions.

But the implication is that when someone is layed off (or their business goes under) they go from being smart, to being not smart. And then, if/when they find a job again, suddenly they are smart again.

It's all quite tautological.

In the real world, as opposed to the pretty model in your brain, smart means more likely to be employed than M&S, but smart non-slackers get laid off and lose their businesses too. They will be employed again faster on average than a M&S, but in a deep recession they may stay unemployed for a long time if they can live off savings, because taking a random mcjob looks bad on your resume and takes time away from finding better employment.

I think the problem here is your phrase: "If we approximate "smart" as "capable of holding a job or business". Unless you believe that people suddenly magically became dumber over the last year or so, that simply isn't a good approximation.

These people who were employed before but aren't now aren't M&S, they're victims of somebody else's mistakes. For example, the guys at GM aren't losing their jobs because they're stupid, they're losing them because their bosses were. The small business owner whose business folds because the bank won't renew his loans because *they* fouled up and have no capital left isn't the dumb one, he's a victim of some external M&S, just as someone who's been mugged is.

Now of course they can re-train once they lose their jobs, but that doesn't happen overnight, it takes several years if you're a skilled professional.

There was a preacher long ago known as Koholeth, whose wise words were generations later committed to writing, and the 1600s english translation thereof is well known: "I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all."

One of the better popular writers on economics, George Goodman who wrote under the pen name "Adam Smith" used a lot of quotes from this old preacher who seemed to intuit a great deal about economics long before it was ever studied scientifically.

You Must a got a hold of some good shit last night cause this makes no sense. GDP is not a measure of wealth it's a measure of productivity, More specifically it's the gross aggregate of a groups ability to transfer a product of that groups labor in exchange for another product simply defined in a currency.

GDP=C+I+G+NX

C is Private domestic consumptionI is investmentG is government spendingNX is net exports.

Notice there is no measure for Saving or for levels of Debt

Also the transactions that are selected for GDP are very specific and often leave out large sectors of economic activities we could collectivly classify as Recylced transactions used goods and such.

It also does not include foreign expenditures which are increasingly important. The use of GDP for your theory is flawed from the start.

Techological adavancement does increase GDP becasue it free's manual labor to perform jobs previously to expensive to do because the demand for it could not be met. It may result in a lower wage for a particular person but that does not mean a decrease in GDP.

For example let say a factory worker makes cinder blocks for a living at a wage of 10 dollars an hour. it takes one hour to make one cinder block by hand. a process is invented which makes 10 cinder blocks per hour it takes one person to run the machine and 5 people to maintain the machine so now we have 4 people free to do another job. lets tsay 3.9 of them get other jobs. Here your product increases. Your argument relies on the assumption that there's no growth in the demand for labor which as history showes is simply not true that's why you're wrong. Because as old jobs become obsolete new jobs are created that replace the old job. So you have the old job being done more efficiently creating product and the new job which is a product of the old job being made more efficient creating product.

Longtime lurker, first time poster. This post finally got me off of my ass to call you on some really faulty argumentation.

Given the sources that you cited, I have to assume that the "GDP/smart" function on your graph was derived by dividing GDP by the employed population (population times the employment rate).

There are several problems with this, escalating in severity.

You claim to include retirees, students, and between jobs in the "smart"category. Unfortunately, you didn't include that in your "GDP/smart" graph. Allow me to demonstrate why that is a problem.

As a person retires, their productivity plummets, and rightly so. They deserve a period of rest after a productive life. However, by continuing to including them in your "smart" category, you have just reduced the GDP/smart. Assuming that the rate of retirement and the productivity of retirees is constant, this would not affect your "GDP/smart" function. However retirement rates are increasing, and workforce participation rates among retirees are decreasing. (bit.ly/2x4mgZ) Both of these factors lead to a decreasing marginal productivity of "smarts" over time that is not included in your graph.

This may just be an accounting error that doesn't change your basic premise, but at the very least it's not internally consistent.

More distressing is that the implication of your argument is that "stupidity" has a direct causal effect unemployment, and is the prevailing explanatory variable.

If that were true, why was there a spike in unemployment in 2008-09?

You say:"However let's introduce morons, people who cannot do skilled jobs. With the technological advancement they can no longer employed in productive industry."

Did you just assume that the rise in unemployment in 2008-09 is due to a tipping point in technological progression? Disregarding what we actually know to be true about the cause of the current round of unemployment (lack of investment), it seems highly unlikely that there would ever be a sudden, rapid technological advancement that would neutralize 3-4% of the labor force.

If the spike in unemployment in 2008-09 is not caused by individual workers' stupidity and inability to adapt to technological change, your argument is invalid.

Gevlon, I know from some of your past posts that you are a reasonably intelligent guy, but many of your recent posts have displayed some disturbing misconceptions about the application of economics. Since you are a fan of the feedback mechanism of the free market, I'll give you a couple more weeks, and if you aren't able to construct a better argument than you did above, I'll be voting with my browser and removing you from my RSS feed.

Part of what makes Gevlon interesting is his tendency to make controversial posts. I've never been convinced that he truly believes all that he says. One of his earlier posts is about the importance of controversy in a blog in driving traffic to it. So, my advice would be to explain why he's wrong, but not get angry to the extent of removing the RSS feed.

Just a marginal, but fundamental point. Dogs have no rights. Think about it. If they had rights, it would be very problematic, we could't kill animals and eat them, as habeas corpus is the first of the rights. But we have duties towards the animals. It's quite different.

Actually...lots of dogs work. They either make their owners richer (bug-detecting dogs, livestock-herding dogs, acting dogs) or provide needed services (guide dogs for the disabled, police dogs, military dogs, therapy dogs). Dogs love to work. If you don't give your dog something to do for you? You have an unhappy doggy (and probably a pile of poo in your favorite shoes). If you've missed the contributions of millions of dogs, I bet you've missed the contributions of the humans you'd just rather exterminate. Even though you don't say it, that's what this post is about--getting rid of people. As for me, I have yet to encounter a permanently unemployed person without a serious disability. I've met unemployed people, homeless people, housewives (who...you probably want to kill too!) and they all make contributions to society. Your politics just won't let you see that. And you don't just want to kill the disabled, right, but pretty much everyone at the poverty line.

I haven't commented in a while, but this blog showcases the fundamental tragedy of human nature. Most large-scale crimes have their origin in the idea that some people (tihose useless people, those (fill in adjective) people just ought to die. It's logical, isn't it? The world should be reduced to people who are...just like you? But where does the line of logic stop?

I'd also like you to recognize that there has to be diversity among human occupations and professions. You can't just do away with the unskilled labor force or push everyone into management--then who is left to make stuff? The U.S. is sadly learning this lesson with an economy pushed too much into the service sector.

I guess the only thing that surprises me here is that you have readers who gaily agree with you and your attractively charted (but still evil) plan.

Inevitable doom is just a rewrite of the rules that corrects the situation to a new distribution curve.. like a new expansion to WoW. Did you stock up on your economic goodies to capitalise (lol) on the upcoming world .. uh.. cataclysm?